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Weak foreign markets, concern over Friday’s jobs numbers, and a change in traders’ buying patterns led to a continuation of Tuesday’s selling.

There were several significant economic reports issued Wednesday: Factory orders rose 1% in April, but analysts had expected an increase of 1.6% the ISM non-manufacturing index improved slightly; and non-farm business productivity was down slightly. Of greater significance was a decrease in unit labor costs — a 4.3% decline in Q1 — which was a revision of a previously reported increase of 0.6%.

At Wednesday’s close, the Dow Jones Industrial Average was off 217 points to 14,961, the S&P 500 fell 22 points to 1,609, and the Nasdaq lost 44 points at 3,401. The NYSE traded 739 million shares and the Nasdaq crossed 458 million. Decliners outpaced advancers on the Big Board by 4.1-to-1 and on the Nasdaq by 3.4-to-1.

Although a near-term top has formed and a Key Reversal Day (KRD) was confirmed by Wednesday’s selling, the intermediate-term and long-term technical pictures are still bullish. The short-term trend was decisively broken when the 20-day moving average (green line) was smashed last week.

The next significant support is at the 50-day moving average at 1,604, which also coincides with the intermediate trendline (solid red line). Support near that line is also provided by the April highs at 1,597. And there is a serious support zone at 1,539 to 1,575, which represents about six weeks of trading from March to mid-April.

Conclusion: The S&P 500 is in oversold territory with significant support from 1,597 to 1,604. This area is significant because it not only contains support lines drawn on previous highs, but because the zone also contains the 50-day moving average and the index’s intermediate trendline.

A temporary intraday break of 1,600 could lead to a tradable reversal, and that could end the retreat. But a close under this zone would probably result in a pickup of selling and a test of the next support zone at 1,539 to 1,575.

Friday’s significant jobs report may have an impact on the immediate structure of the market, but until then traders are on the knife’s edge.